A Flat Tax

I am in favor of a flat-rate system of taxation, a system that applies fairly and equally to all, regardless of income. I include corporations and churches in this system as, in some aspects, they are legally regarded as individuals.

The tax rate might be as low as ten or fifteen percent, whatever is needed to finance the government. There would be no deductions, exemptions, or exceptions. This also means no tax credits for any reason. By removing even the possibility of loopholes, all persons would pay their fair share. Who would mind paying if they knew everyone else was paying, too?

There are groups who oppose such a plan. Obviously, anyone making money from the present tax system is opposed to change. The Internal Revenue Service, for example, could be almost eliminated. Tax returns would be needed only for the self-employed and those having income other than wages and salary, such as tips or gambling income. All others might send in a simple affidavit stating that they had no unreported income. The IRS would have little to do, and could be reduced to a fraction of its present size and budget.

Employers would deduct and pay the flat-rate tax as they now do under the present system. Because the percentage would be the same for everyone, it would be far simpler to do. (No W-2 forms for openers).

High-income persons with tax shelters form another group opposed to tax reform. Many of these people and corporations pay little or no tax year after year. Because this group finances many political campaigns, they exert influence far out of proportion to their numbers. Because many politicians are in this category, it is unlikely that they will bite the hands that feed them, or vote away their own favored tax situation. With these groups and the IRS opposed to any real changes in the tax structure, I see little hope of reform, but it is nice to dream.

You precisely saved me atleast 1 hour of time. I am making a project in this particular topic and your contribute has helped me through one of the topics of my project. I will browse to the other pages now.

I am in favor of a progressive tax system without loopholes. Creating a tax structure in such away that those who are talented enough can live the American dream and those who are not can survive, seem fair enough. I want to live in a nation where the government helps protect the citizens and in return makes sure all citizens, regardless of talent and ability, survive.

I have thought about a progressive tax and the one thing I don’t care for is it effectively costs you more to be an American if you are more successful than others. A flat tax as a percentage of your income essentially costs everyone the same.

As for socialistic, most of the things that Americans like was branded as “socialistic” when they were introduced. But ask them now to give up their public streets and highways, free schools, national and state parks, fire departments and police protection and see how loudly they scream.

After a bit of reading, I’m coming closer to supporting the Fair Tax. A Flat Tax is quite similar, and I believe I would also be in favor of that. Didn’t Jerry Brown propose this in 1980 while running for president? Interesting to see that he has his old job back (And Ahhhnold still has Maria — ummm — no losers that I can see). And maybe he’ll be more effective this time, now that he’s not boinking Linda Ronstadt. LOL

I think you are right. JB did propose a flat tax, as I remember. But considering who benefits the most from the current system, changes seem pretty unlikely. When the wealthy provide the money to be elected to congress and most are wealthy anyway, it’s unlikely they will either bite the hand that feeds them or shoot them selves in the foot. (or maybe a little higher up)

I’d go further and do without any personal or corporation tax, keeping national sales tax as the main source of government income. I think it’s the fairest of taxes as it taxes more those who have more and spend more and because it taxes spending and not wealth creation. This will completely do away with a huge and expensive Inland Revenue, stimulate employment and production, make people wealthier and with more spending power – thus paying much more sales tax (VAT). The rate of VAT should be different – stimulating or punitive – for example food and books could be free of tax and alcohol, cigarettes, petrol, luxury items should be taxed at the highest rate.

The problems I see with any form of sales tax is that is is something easily avoided and it does hit the lower-income people harder. When a person is wealthy, they really don’t care what something costs as long as they can get as much as they want when they want it. The money is just numbers in a book.

Furthermore, any variable tax can be manipulated to make or break things that are favored or disliked by the ruling party.

For example, those against a particular religion could conceivably tax items unique to that religion at a rate designed to make them unobtainable to most.

Conversely, a distiller’s lobby could work to have certain types of alcohol taxed at a lower rate.

As you know, politics is not an honest business and is vulnerable to being used for purposes bad for the country and the public. So says Captain Obvious. :D

John Kozul

January 23, 2013 at 11:34 am

Any tax can be avoided but I disagree about sales tax being easily avoided. Even in a corrupt eastern European country where I live they managed to get it to work well. On the contrary it’s the income and corporate tax that are easiest to avoid, especially for the rich. They just reside part of the year in some tax haven or start a company that with some creative accounting never has any profit. Or both.

How can a flat tax be legally avoided? There would be no deductions, exemptions, nothing. Corporations avoid taxes by concealaling income and lobbying for those deductions and exemptions, as do the wealthy.

If there were no way to legally avoid taxes, it could not be done without the possibility of prison.

I am am American but have resided in Brazil for ten years. I am liable for taxes in both Brazil and the USA. Even money I earn and spend here in Brazil is taxable by the USA.

If you are not registered as employed you pay no tax. If you start a company and employ your self and you pay yourself $1 you pay tax on $1 – with creative accounting you show no income (for example your private flights to and from Brazil can be tax deductible business expense) – you pay no corporate tax. You register company (Google) in tax haven and you pay no tax. This is just of the top of my head, there is much more. As for you personally if you get rid of your US citizenship you pay no tax in USA. Of course people who are not wealthy and are employed by others will find it harder to avoid it, but for self employed and the rich it was always easy. If you are going to press me on details may be best contact me on my email. I love discussions with intelligent people.

Is there something about “No deductions or exemptions” I did not explain well enough? If there is a single rate for individuals and companies, it doesn’t matter what a self-employed person pays himself. The rate on the company is the same at the rate on him as an individual. So the tax will come from one pocket or the other. It will make no difference in the end.

Getting rid of a citizenship in one country in exchange for another is not always easy or wise. I am eligible for Brazilian citizenship this year but I doubt I will do it as I see no advantage to it and several negatives.

No, it looks I didn’t explain well enough. You can only tax profit, not turnover and if a company shows no profit there is nothing to tax. Showing no profit is not the same as not having income, any accountant will tell you. I gave you an example of airline tickets. Why don’t you research how much the biggest US companies pay in tax, I think you will be surprised. Also may be you should talk to an accountant if you are paying too much tax, I am not one btw. I am just a businessman who like you lives in two different countries but unlike you pays no tax at all. Legally. With that I wish you good bye Sir and good luck.

A flat tax as I proposed, is on income, not profit. Remember, no deductions, no exemptions. If the tax is 15% and you have a revenue of 100,000 a year, your taxes are $15,000. Profit is your problem, not the government’s.

What companies are paying now isn’t relevant. They are profiting under the current system that allows them to deduct anything they like. Having owned my own business (a fitness center) I was amazed at what my accountant said was permissible.

For example, when I did the build-out in a rented facility, I had to install new air conditioning. I had an agreement with the building owner that they would buy it from me by deducting the cost from the rent each month for the first year. The accountant, who was also the accountant for the shopping center, said we would take the “fast depreciation” deduction on the a/c because, after the first year, I would not own it. The second year, the center could deduct it from their taxes at the normal depreciation. That meas 100% of the cost of the a/c system was deducted twice; once by me with the fast depreciation and once by the shopping center at normal depreciation. I asked the accountant, “Are you sure this is legal?”

He told me, “We don’t make the rules, we just play by them.” Obviously, this was a “loophole” deduction in the tax code no doubt urged upon congress by lobbyists to “encourage economic growth.” That’s always a good excuse to benefit the wealthy corporations and individuals.